There can be two instances for supply of labour under GST

  1. Supply of both material and labour - The supplier is engaged in supply of labour ( hired labour from outside) alongwith supply of own materials such as cement, steel, sand and other materials, then such service would be classified as a “works contract”.

“Works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration, commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.

The expression ‘works contract’ is limited to contracts to do with immovable property.

  1. Supply of only hired labour – If the supplier is providing only hired labour from outside and the materials is provided by the supplier, then such contracts will be called as “pure labour  contracts”.

Exemptions in case of “pure labour contract”

  1. Services provided by way of pure labour contracts of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works pertaining to the beneficiary-led individual house construction or enhancement under the Housing for All (Urban) Mission or Pradhan Mantri Awas Yojana.
  2. Services by way of pure labour contracts of construction, erection, commissioning, or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex.

 The above exemption is not available if the supplier does

        a)    construction work as a whole including labour

        b)    if such construction involve multiple units (more than one dwelling unit).

Reverse charge

  1. In case the outside hired labour are unregistered users, then the supplier of service will have to pay GST on reverse charges on the hired charges paid to the labour.
  2. In case the outside hired labour are procured from registered agencies, then no reverse charge will be applicable. The supplier has to acquire labour from registered agencies on payment of GST.

SAC code and GST rate for Employment services including personnel search, referral service and labour supply service

SAC Code

Nature of service

GST Rate


Executive or retained personnel search services



Permanent placement services, other than executive search




Contract staffing services



Temporary staffing services



Long-term staffing (pay rolling) services



Temporary staffing-to-permanent placement services



Co-employment staffing services



Other employment and labour supply services nowhere else



The above services are not mentioned under the list of services that are exempt from GST. The rates for the above services have also not been explicitly mentioned by the GST Council. Hence, the default GST rate for services of 18% would be applicable for the above services.

Disclaimer - The information provided in this document is for general information only. It is based on the information available publicly. The user of this document should be aware that the interpretation or implications of relevant GST rules may change/vary depending upon circumstances.

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